EMERGING NUMBERS
The consultants have good reason to zero in on this layer of the pyramid,which is squeezed between the much-touted middle class and the BoP.For one,their annual household incomes are nothing to sneeze at between 1.5 lakh and 3 lakh,as against under 1.5 lakh for BoP households.For another,they are the largest chunk of the population at 470 million;and by 2021,they are projected to still be the largest,at 570 million,or 42% of the population.By then the EM base is expected to account for $1 trillion of consumption,up from $450 billion currently.Perhaps that is why Philips no longer has BoP in its lexicon.Instead,the Dutch electronics multinational prefers to call its strategy to reach consumers at the mass end Philanthropy by Design (PbD).In 2007,Philips consumer lifestyle division test-marketed a new wood stove via NGOs.A little after a year,the company ended its test and recalled the product to the drawing board as the NGOs failed to find enough takers for what should have been a revolutionary product.While Philips officials insist the project hasnt been shelved,there are few signs it will be re-launched in a hurry.A spokesperson from its Netherlands headquarters confirmed that Philips Consumer Lifestyle has completed a commercial pilot project,which ran between 2006 and 2007 in Maharashtra,Tamil Nadu and Uttar Pradesh.However,in India,Philips encountered an unforeseen coincidence of market conditions and distribution problems, says the spokesperson.Whereas in Africa we managed to set up a solid partnership that we believe will be the foundation for success. Exit BoP,enter PbD,which allows local stakeholders to use intellectual property and design for free as part of the companys contribution to sustainable development.The returns are not measured in terms of profit,but in building brand equity and trust.
MOVING UP
Marketing low-cost products with high-cost business models makes little sense for most companies.They are discovering that reaching far-flung and diverse consumers is a persistent headache since it involves huge costs in distribution and sourcing as well as in monitoring and training suppliers.Worse,marketers are quickly realising that there is no standard affordable pricing at the BoP.What is seen as affordable at 500 for one set of consumers is too expensive for another bunch in Indias diverse BoP segment.The tension in cracking the code is heightened by a clash of priorities between corporates and NGOs as they battle social good versus business and profit objectives.Finally,consumers with uncertain cash flows and limited means that make upfront payments difficult contribute in making BoP a tough nut to crack.That may explain why companies such as Nokia,Idea Cellular and Bajaj Auto have tweaked their solutions to target the EM segment.Mobile phones and services,which had 860 million subscribers at last count,is an area of massive potential.Idea Cellular,for instance,transformed its sales structure,moving from a hub-and-spoke model to one more focused on end salespersons,and built finance,training and HR practices around them.Nokia,which is battling to stay relevant in the handset market,turned its attention to mobile services,piloting a mobile payment initiative with Yes Bank for nearly a year before rolling it out in 2011.This service will allow users to pay insurance premium,top up their prepaid connections and pay bills by using text-based services from their phones.Many of these services are not for the very poor, explains Sashank Tripathi,executive director and leader,strategy and research,PwC India.Like Nokia Money is meant for those in the EM,who are not destitute,but will need different approaches to court and make sustained profits. Even companies that are focused on BoP are realising they have their task cut out getting to the bottom.Consider industrial giant GE,which went back to the drawing board with its baby warmer for the masses by removing top-end features,reducing power consumption and extended its sales reach.The companys focus was to create healthcare access to BoP people.However,as we started our activities,we realised that we are reaching people in the middle class in geographically tier-II and tier-III towns,where there are many a million who cannot be called bottom of pyramid, says a GE spokesperson.GE is now looking at ways to make its solutions more cost-effective for BoP consumers.There are some 14 innovations and few market /disease-based approaches to ensure healthcare access to more people, adds the spokesperson.
LOCAL CONNECT
Not everyone has given up on BoP.Hindustan Unilever Ltd (HUL),Indias largest marketer of home & personal care goods,claims success at the bottom.The recipe: self-help groups (led by Shaktiammas),low-priced pack (selling shampoos and detergents in sachets for 1),altering product prices and its most recent initiative called Khushiyon ki Doli,a campaign for media-dark villages.The Doli is essentially a van that features products from HULs portfolio such as Wheel,Lifebuoy,Clinic Plus,Pepsodent,and Fair & Lovely.It has helped HUL reach locations with a population below 4,000.Says Hemant Bakshi,executive director,sales and customer development at HUL: Serving BoP consumers has been a rewarding experience for HUL,both in terms of business opportunity and consumer insight.The consumer insights in this market have helped us build new products and scale up businesses. He points to Project Shakti,Pureit water purifier and Wheel detergent as examples of how HUL used these insights to build viable products and services.BoP market is an important part of HULs business as it covers a large part of Indias population. Yet,theres little clarity on how much such initiatives contribute to HULs bottom line.Experts point out that companies do themselves few favours when rushing headlong with BoP strategies unaware of market realities.For instance,P&Gs razor launch in India failed because the company tested the razor with Indian men at MIT,instead of in rural India,where limited access to running water made it a painful and ineffective product.P&G then launched Gillette Guard,its first razor developed entirely in and for Indiafor 5and other emerging markets.The launch was based on the learning that most Indian men sought a safe razor that could be easily rinsed in a bowl of still water.Prema Gopalan,founder of Swayam Shikshan Prayog,a learning and development organisation,says she is frequently courted by multinationals looking to build a BoP strategy -- and they usually havent a clue about how to go about it.They approach BoP consumers with standard operating procedures that they use for urban markets, contends Gopal.Unlike many,Amit Jain believes that consumption alonewithout an opportunity to generate income -- is a viable BoP strategy.The CEO of HealthPoint Services,a for-profit social enterprise,says corporates need to understand the dynamics of the market and try to generically expand it instead of cannibalising it.Consumption is consumption, he says.Companies should be driving consumption and meeting BoP consumer needs,not ensuring their income growth.The battle has to be won in the minds of the consumer in this segment. A clear victory in that battle is still some time away unless marketers think moving to a new battlefield called the emerging middle is a more practical option.
Tuesday, March 6, 2012
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